Acquisition aids Valero Energy Partners

The first set of assets that Valero Energy Partners LP purchased from refiner Valero Energy Corp. paid off in the third quarter.

Valero Energy Partners paid $154 million on July 1 for three logistics systems that helped propel earnings before interest, taxes and other costs higher than expected, analyst Jeremy Tonet of JPMorgan said in a note to clients.

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The three logistics systems the partnership acquired are integrated with Valero Energy Corp. refineries in Oklahoma, the Texas Panhandle and Three Rivers in South Texas. Valero Energy spun off the partnership in December.

Valero Energy Partners President Rich Lashway told analysts that Valero Energy Corp.’s 2015 plans are aimed at growing its logistics assets “that increase its access to North American crude and product exports.”

Those plans will add to the partnership’s “queue of potential acquisition targets,” Lashway said, and will help the partnership deliver on its promise of 20 percent to 25 percent annual growth of its distribution.

Net income for the locally based logistics partnership rose 3 percent to $17.54 million, or 30 cents a unit, compared with $16.97 million for the same period last year.

Analysts as polled by Bloomberg News had expected the logistics partnership to earn 25.2 cents a unit in the quarter.

The partnership’s units rose 61 cents to close at $44.52 on Wednesday.

“We delivered strong throughput and revenue growth during the third quarter,” Chairman and CEO Joe Gorder said in a statement. “We also completed our first acquisition and increased the quarterly distribution by nearly eight percent to 24 cents per unit. We're executing our growth strategy.”

The partnership’s revenue climbed to $33.7 million compared with $32 million for the year-earlier period. Analysts had anticipated revenue of $30.3 million.

Revenue rose mostly as a result of higher volumes handled by its logistics systems in Memphis, Tennessee, and Port Arthur, the partnership said.

The company’s distributable cash flow was $21.1 million in the quarter. It covered its distribution to limited partners in the quarter by 1.5 times.

The partnership announced a quarterly distribution of 24 cents a unit on Oct. 14, an increase of almost 8 percent. JPMorgan’s Tonet said he expects the company to meet its goal of more than 20 percent annual distribution growth “for multiple years going forward.”